What happen to the upturn?

SAN JOSE -- What happened to the anticipated recovery in the semiconductor industry?

While it's a bit early to write off the year, there are more signs that the chip industry will remain in the tank in 2002. Just this week alone, the IC and telecommunications markets were rocked by a plethora of bad news from Alcatel, Motorola, WorldCom, and others.

But even before this week's turbulence, analysts were already looking to tweak their semiconductor growth forecasts for 2002. At present, for example, IC Insights Inc. predicts that the worldwide IC market will grow 5% this year, from $118.5 billion in 2001, to $124.2 billion in 2002.

After a slow start in the first half of this year, IC Insights also originally predicted that the IC industry would show double-digit sequential growth in the second half.

"We were thinking about double-digit growth in both the third and fourth quarters," said Brian Matas, who tracks the market for IC Insights of Scottsdale, Ariz. "Now, we're thinking of double-digit growth in the fourth quarter, but single-digit growth in the third quarter," Matas said.

Without a doubt, it's a confusing picture in the marketplace. "On one hand, you've got AMD and Intel," he said. The analyst was referring to microprocessor rivals Advanced Micro Devices Inc. and Intel Corp., which have separately lowered their Q2 forecasts.

"On the other hand, you've got TI, ST, Fairchild and others that are raising their forecasts," he added, referring to Texas Instruments Inc., STMicroelectronics Inc., and Fairchild Semiconductor International.

Others also seem to be worried about the market. "We've seen some disconcerting noise in the market," said Tien Wu, president of the U.S. subsidiary of Advanced Semiconductor Engineering Inc. (ASE), Taiwan's largest chip-packaging house, in a recent interview with SBN. "The inventories are up a little bit. Right now, we're also not sure about end-user demand," he said.

Still others painted a bleak picture in the market. The semiconductor industry recovery won't arrive until 2003 at earliest, and more likely not until 2004, said NEC Corp. chairman Hajime Sasaki, an in interview with Electronic Engineering Times earlier this week.

And needless to say, it was a dreadful week for the industry. Continuing its painful measures to cut costs, Motorola Inc. on Thursday said it plans to take a $3.5 billion charge, reduce its workforce by approximately an additional 7% or 7,000 positions, and consolidate more of its chip-making plants.

Meanwhile, the troubles at telecommunications giant WorldCom Inc. could have a ripple effect in the industry, especially among equipment and semiconductor manufacturers, according to analysts and industry observers.

On Tuesday, the nation's second-largest carrier stunned the market by acknowledging that it engaged in massive accounting fraud--a move that could bring the company into bankruptcy. Then, on Wednesday, networking-equipment giant Juniper Networks Inc. indicated that the events could have an impact on its bottom line.

French telecomms equipment maker Alcatel is set to cut a further 10 000 jobs worldwide. The company also admitted it would not make a profit this year, as it forecast just two months ago.

Electronic Engineering Times, a sister publication of SBN, contributed to this report.